In a merger or acquisition, late or never-filed Form 5500s can be an expensive benefits problem to acquire and a sign there may be other issues with the company’s benefits plan. It’s a potential problem we efficiently solve with M&A benefits due diligence.
Transcript
The Department of Labor and the IRS require most employee benefit plans to file an annual Form 5500 to report the plan’s financial activities for the year.
Buyers, sellers and their transaction attorneys are often unaware of the penalties the DOL and IRS can impose if the form is filed late. In the worst-case scenario, the DOL’s “maximum” penalty could add up to almost $800,000 if the form is one year late. It’s rare, but possible.
Even the DOL’s less harsh “standard” penalty for late filing caps out at over $18,000 per year. And, for a plan that never filed a 5500, but should have, that penalty caps out at $30,000 per year.
In a merger or acquisition scenario, late 5500s (or 5500s that were never filed at all) can be an expensive benefits problem to acquire. And it is frequently a sign that there are other issues with the company’s benefits plan that need attention.
This is why our clients find that an employee benefits attorney can be invaluable during the sale of a business. We help sellers find and correct mistakes that might otherwise impact the purchase price – often with greatly reduced penalties or no penalties at all.
For buyers, we bring employee benefits issues to light before they become the buyer’s problem so that they can negotiate correction costs into the deal.
Whether you’re getting ready to sell your company or buy one, we’ll help you find and correct employee benefit plan mistakes to keep your transaction on track to closing.
If you need specific guidance on this topic, let’s start a conversation.
This podcast is for general informational purposes only. It does not create an attorney-client relationship between Employee Benefits Law Group and the listener or reader and does not constitute legal advice for a specific situation.
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Our Employee Benefits Due Diligence Coverage
We’re not just ERISA lawyers. We are transaction-tested benefits lawyers with tax credentials. And, we are supported by a team of experienced plan administration specialists.
